Schering-Plough Slumps as Sales Slow

By Sarah Rubenstein

Schering-Plough’s shares tumbled today after the drug maker announced third-quarter results that were up but that missed Wall Street’s lofty expectations.

In an interview with the Health Blog, chief executive Fred Hassan tried to calm investors’ nerves. “You always end up with some quarters where there can be an undershoot, some quarters where there is an overshoot,” Hassan told us. “The company is as good today as it was yesterday.”

Hassan pointed out that Schering’s shares have made a run recently. The stock was priced in the mid-$20s in the spring. It “does go up and down,” he said. In a sharp reversal today, Schering’s shares were off $4.28, or 13%, to $28.43 in afternoon trading.

Though Schering’s business has been performing pretty well lately, the issue for the third quarter appeared to be that the company’s profit and sales figures were not as robust as investors had expected. The growth of sales of cholesterol drugs Vytorin and Zetia were flat sequentially from the second to the third quarter. Schering, which markets the medicines jointly with Merck, depends heavily on those two drugs.

Separately, the company said a drug in its pipeline for blood clots showed encouraging results in two small studies in Japan. Schering has been talking up the drug, called a thrombin receptor antagonist, or TRA, lately, and analysts say it has potential.

Hassan said Schering will explore the idea of partnerships with other companies on some drugs in its late-stage pipeline. But the bar to justify a partnership on the TRA would be harder to clear, because Schering-Plough would want the partner to offer up a drug that’s attractive enough to justify sharing revenue from the TRA. “The quids that [other drug makers] showed us did not have the excitement that we had with our own product,” Hassan said.

Update: Deutsche Bank drug analyst Barbara Ryan spoke with the Health Blog this afternoon, describing some of the factors that could have pushed Schering’s stock down today. For one thing investors may be uncertain about what the planned Organon acquisition will do to earnings. For another, Schering’s gross margin was below expectations, Ryan says. And finally, the market’s come to expect big things from the company, quarter after quarter. So today’s earnings were something of a letdown.

“It’s a company that has built in a very large expectation for growth, and obviously they disappointed,” Ryan says. “Most of the people that own the stock are growth-and momentum investors, and that’s really being called into question here.”

Comments (5 of 7)

DR. KALLMAN, per dr. henrys office,pet vet vaccination. you have paper work re issue of charges due to reaction from vac. of 320.00.on 9/23/07PLS RESPOND

1:58 pm October 29, 2007

Dick G wrote :

RE: Comment by Christopher the CPNP
Chris you: prescribe drugs for patients, own stock in pharmaceuticals, accept gifts for prescribing drugs. You don’t think this constitutes a conflict of interest??

8:59 pm October 22, 2007

Christopher the CPNP wrote :

The generic comapanies are starting to come into their own, and can now reward physicians and nurse practioners for prescribing generic drugs. I was given a check for $200 and a two day stay at a resort here in CT for prescribing generic Zocor to a child (with hypercholesteremia) for the first time. It is impossible for some comapnies such as Shering to compete, which is sad as I own a decent amount of Schering stock. Just another viewpoint...

7:55 pm October 22, 2007

Anonymous wrote :

Too much price competition from generic Zocor. That's the main concern and it shouldn't be since it appears that Vytorin is a superior drug, even better than Lipitor.

7:49 pm October 22, 2007

Samir wrote :

All it matters is the actuals vs street's expectation, the current market price reflects the expected earnings and if the actual earnings are not in line of expectation there is correction of the stock value. Thats what happened today with SP.